Tuesday, September 7, 2010

On Friday the Euro confirmed a new daily pattern that could add almost ten U.S. cents to its value; the pullback underway this session might provide us with an opportunity to catch the ride up.  The daily pattern was described in our tout of September 1.  It is now active and initially targets a midpoint at 1.3175; the "D" target is 1.3763, almost ten cents above the current price.  During the hurly-burly trading in the moments after Friday's NFP data release, the Euro bounced substantially from two pips above the midpoint of a smaller pattern that we touted that day.  Today's pullback, which is threatening to break that pattern, can be seen as an impulse wave on the intraday charts beginning at 1.2892.  Traders should watch for a new bearish pattern to emerge which would offer low-risk levels at which to enter on the long side.  The daily pattern will remain active so long as 1.2587 is not revisited.  (Posted by Doug McLagan)

Late last week, December Silver made a two-year high and broke through a midpoint pivot whose sibling "D" target at 20.45 is now in the crosshairs.  On Thursday we noted four prior highs on the weekly chart that might soon be eclipsed by the silver rally, and the first two were indeed surpassed that day and the next.  In the process, the midpoint pivot at 19.655 that was described in Wednesday's tout gave way without a fight, telling us to expect its related "D" target to be reached soon.  The rally high of 19.985 occurred on Friday, and since then it looks like some price-capping has been going on.  But as the new season gets underway this week, the key levels to watch are the round number of 20.00, the Hidden Pivot at 20.45, and the next major prior high of 20.80, basis the December 2010 contract.  (Posted by Doug McLagan)

DaBoyz refreshed, revitalized and extended their summer-long bull trap on Friday with a push above a 1098.50 peak that had been noted here earlier. This means that the rally has surpassed not only the single internal and external peaks required to signal a proper impulse leg, but a second "external" peak for good measure.  They will not get likely past a third without a significant correction, however, since that would imply a further, unpaused rally to at least 1128.00.  If this were to occur, we would want to have yet one more benchmark in reserve to test the mettle of buyers. Accordingly, I'll stipulate that they must exceed the summer solstice high at 1129.50, and thence the May 18 high at 1142.75,  before we are obliged to act impressed.  As always, it is not merely the surpassing of prior peaks that will tell us how much buying power remains, but the way in which they are surpassed. For example, a thrust that exceeds two peaks without a b-c pullback should be regarded as more powerful than one that exceeds three peaks with one or two retracements along the way.

Gold will have to get through a cluster of Hidden Pivots just above the rally high of 1256.6 in order to challenge its all-time peak; a print of 1262.6 would tell us that the challenge is imminent.  Four different "A" points on the recent gold charts yield a series of pivots, ranging from 1257.0 to 1262.3, which are so tightly spaced as to present difficulties to traders.  If pressed we would focus on the highest two, a midpoint pivot at 1261.6 (A=1211.7) and a "D" target at 1262.3 (A=1233.5), and we would not use a stop any lower than 1262.6.  On Friday our earlier "D" target of 1267.2 was cancelled, and at present we don't see any other meaningful pivots below the all-time high of 1270.6.  Should the market head lower, we will have to find our support levels with the help of the short-term patterns that emerge.  (Posted by Doug McLagan)

[From reader and paid-up subscriber Oliver Fuchs of Munich, we have a very interesting metaphor to explain the seemingly anomalous economic boom now going on in Germany. Is it merely the final, spectacular tipping of a ship about to slide into the deep? Oliver explains why this may be so. RA] If the global economy is the Titanic, then what is happening in Germany might be the stern rising as the USA “bow” begins to sink. When we read about the grim predictions of Austrian School economists in particular, a Titanic-style crack-up seems like the sort of thing anyone would notice. But the seemingly anomalous business boom in Germany that everyone seems so happy about (and the bankers say -- what else? – “Be merry!”), might just be that: a boom/bust cycle bearing down on us like a juggernaut. Whatever the case, few are voicing concern over troubling signals in this German boom: German sovereign-debt interest rates are falling as if a Fed were causing it, but on free-market action; the Euro is much stronger than anyone had anticipated, considering the PIIGS dilemma and Eastern Europe’s deep economic wallow. German wages haven’t risen at all, even though booms usually translate quickly into higher wages. And the consumer boom, such as it is, is geared toward safe investments and matters around the house (such as installing those solar panels, etc.). The savings rate keeps climbing although there is hardly any interest being paid, and gold-buying is beginning to explode. Inflation is creeping through the holes via costs for utilities and government services. The employment situation is bright, but that has been going on for a while due to the emerging markets and the famous “Kurzarbeit,” a government-sponsored reduction of working hours to avoid layoffs in a crisis. Construction is also suddenly